In February 2019, the results of the third Annual Georgia Construction Outlook Survey were released. The survey respondents includes general contractors (44%), specialty contractors (53%) and heavy contractors (3%) with gross revenue size that ranged from in excess of $1 billion to less than $5 million. Three-quarters of respondents reported revenues of less than $25 million. Here’s what they had to say about the state of construction in Georgia.

Financial Performance and 2019 Outlook

It was no surprise to see the majority of respondents reporting increased revenues and margins in 2018. Average gross margins from all respondents increased to 11.3%, up from 9.33% in the prior year. Overall, 72% of respondents saw their gross margins increase and/or remain the same. The largest decrease in margins was seen in the heavy contractor sector, with 33% of respondents reporting a decrease in margins. When it comes to backlog, Georgia is seeing a record number of months in the pipeline and 57% of respondents reported higher backlogs than in the previous year. The increase in backlog helps explain why 84% of respondents are expecting increase in revenues in 2019 over 2018. Interestingly, of those expecting increase in revenue, 40% are anticipating an increase of more than 10% from the prior year. So, the overall financial health of Georgia contractors looks to remain strong at least through 2019.

Business Strategies and Concerns

Given the significant amount of revenue increases and project backlog, it is no wonder that, for the third consecutive year, attracting and retaining employees is the number one business challenge for companies surveyed. This is followed closely by employee reliability as a significant challenge. The rising cost of health care made the top five business challenges, with the average increase coming in at 10% last year.

An overwhelming majority of respondents stated that there would be no new business strategies initiated in 2019, and who can blame them with the record number of projects contractors are trying to manage? That said, those that did respond mentioned that expanding geographically is their number one strategy followed in a distant second by expanding their service offerings. The Georgia contractors are drinking from a fire hose, and it’s all hands on deck to deliver projects on time and on budget.

Employment Recruiting, Compensation and Retention Strategies

The survey respondents produced a few interesting insights in the employee recruiting, compensation and retention area. From an employee recruiting perspective, campus recruiting and job fairs came in as the number one way to obtain new employees. In 2018, campus recruiting and job fairs came in as the number five strategy.

According to Professor Siddiqi, head of the Construction Management Department at Kennesaw State University, enrollment in the school of construction management is up significantly and each graduate has a minimum of three offers. When it comes to retention of existing employees, providing adequate compensation and benefits is the number one strategy for employers for the third consecutive year. Interestingly, the average pay raise in each of the past three years has been around 5%. This seems low given the demand for workers and need to retain them. The real increase in compensation comes in the form of project completion bonuses and the equivalent.

Other top employee retention strategies included better training and development, creating an attractive company culture and job flexibility.

For the first time, the survey included questions regarding women in management and ownership. It was reported that an average of 18.7% respondents’ management teams were female. Additionally, respondents reported that their companies had 10.5% female ownership. Similarly, the survey asked for the first time whether or not companies had a formal diversity and inclusion program, and 27% of the respondents mentioned that they had such programs.

Innovation and Use of Technology

On average, survey respondents spend 3% of their revenue on information technology. This has remained fairly consistent for the past three years. When asked about what area of technology companies expected to invest in during the next twelve months, the number one response was project management software followed by estimating software. Quickbooks and Sage remain the top two ERP/business management software packages. BIM seems to be gaining some traction, with 25% of respondents indicating they were employing it.

Concluding Remarks

The overall health of the construction industry in Georgia appears to be strong. Record levels of backlog will help see the strong performance carry on through 2019. With all the time devoted to delivering existing projects, there is little time for developing additional service offerings or implementing additional business strategies.

The survey is a collaborative effort between Bennett Thrasher LLP and the Construction Management Department at Kennesaw State University, headed by Professor Khalid Siddiqi. The survey was sent to more than 2,500 construction companies headquartered in the state of Georgia and focused on financial performance and 2019 outlook; business strategies and concerns; employee recruiting, compensation and retention strategies; and innovation and use of technology.